Solvay SA (SOLB) Earnings Call Transcript & Summary

Hello, and welcome to the Solvay Q3 Results Call. My name is Laura, and I will be your coordinator for today's event. Please note, this call is being recorded. [Operator Instructions] I will now hand you over to your host, Geoffroy d'Oultremont, Head of Investor Relations, to begin today's conference. Thank you.

Good afternoon, everyone, and welcome to Solvay's Third Quarter 2024 Earnings Call. My name is Geoffroy d'Oultremont, Head of Investor Relations, and I'm joined here today on the call by our CEO, Philippe Kehren; and our CFO, Alexandre Blum. The call is being recorded and will be accessible for replay on the Investor Relations section of our website later today. I would like to remind you that the presentation includes forward-looking statements that are subject to risks and uncertainties. The slides presented in today's call are also available on our website. And with that, I will turn the call over to Philippe.

Thank you, Geoffroy, and hello, everyone. Happy to be with all of you. Unfortunately, I need to begin today's call with very sad news. On the 27th of August, one of our colleagues, a contractor who was working on our Torrelavega site in Spain lost his life. His name is Oscar. This is a tragedy. This has a big impact on all of us. And in particular, of course, on our colleagues in Spain. I would like, again, to express my support to all of them and our deepest sympathies and thoughts to his family and friends. We are undertaking a thorough investigation into what happened and what we can learn from it to prevent this from ever happening again. This terrible incident reminds us how critical it is for Solvay to continue to improve our safety standards for the benefit and safety of all our employees, contractors, stakeholders. We have already launched a new safe campaign, safe standing for safety as first engagement. To achieve 0 injuries, we must continue to prioritize safety engagement in the field, and we all need to strictly apply our Solvay life-saving rules across all of our sites as part of a fundamental commitment to safety and integrity. We will never compromise on safety. Well, this is such a difficult transition, but let me now turn to the third quarter results. Slide 5, please. So the main highlight from our Q3 results is that the performance of our businesses in the third quarter is fully in line with our expectations, and it is consistent with our message delivered in our various roadshows and investor meetings in September. Indeed, the trend we observed in the second quarter continued into the third quarter. And as expected, we did not see any structural recovery. Our Q3 sales increased organically year-on-year by 4%, driven by higher volumes in most of our markets. But this is compared to H2 2023, which we previously qualified as the trough in most of our markets. The incremental revenue that we captured in the first half of 2024 from restocking and from opportunistic sales, for example, in auto catalysis did not continue in the third quarter. Yet, we continued to perform well despite this challenging market environment. And I'm also very pleased that we delivered further structural cost savings derived from both variable and fixed costs and from all our businesses and functions. Alex will give you more details on the financials in a couple of minutes. But as the CEO of Solvay, I'm particularly satisfied that we could deliver another good quarter of free cash flow while at the same time, ramping up our CapEx. Strong cash generation is a key element of our strategy, supporting essential investments, shareholder return, and investments in our future growth. Moving to Slide 6. I'd like to take a moment to speak about the transformational project we recently inaugurated at our U.S. plant in Green River. Green River is our large trona-based soda ash facility in Wyoming, where we will soon expand production by 600,000 tonnes. To support this increase and enhance our export capabilities, we have also secured a new agreement with the Vancouver Bulk Terminal in Washington State. Meanwhile, we have also worked on significantly improving the sustainability of our operations at the site. Earlier this year, we already announced the successful phaseout of the use of coal, which was the primary source of energy for this site. And during this quarter, we inaugurated a brand-new regenerative thermal oxidation process, RTO, marking another key milestone in our global efforts to reduce greenhouse gas emissions and drive sustainable growth. This innovative emissions control technology is the first of its kind in the trona mining industry. It represents the largest emission reduction project for Solvay in many years. And alone, it contributes to reducing the greenhouse gas emissions of our whole company by 8%. Overall, if we combine these 2 energy transition projects with the capacity expansion, we are still reducing by 4% the greenhouse gas emissions of Solvay. This is quite an achievement. Clearly, this reflects our determination and passion for process innovation at the service of sustainability. It also strengthens Green River's position as a U.S. benchmark for sustainable soda ash production, and it marks a key step in reducing our global carbon footprint. Achieving carbon neutrality requires ambition and dedication, and I'm proud of our teams for driving us closer to our climate goals while growing the site's capacity. With this, I will now hand over to Alex for the Q3 financial review.

Thank you, Philippe, and good afternoon, everyone. So moving to the financials. And before we get into the detailed quarterly financials, please allow me to start by reminding you the 2 important elements, which I will have mentioned over the course of 2024. Firstly, following the partial demerger of Syensqo on December 9, the group presented the specialty businesses as discontinued operations for the period prior to the partial demerger in the consolidated 2023 income statement. Second, there were some APM and scope changes starting 2024, which are important to consider when comparing with last year. So I invite you to go back to the various communications that are currently available on our website. Let's now review our Q3 financials. And to add comparison, I will comment on organic evolution, meaning at constant scope and currency, unless otherwise stated. Starting with sales on Slide 8. In the third quarter, underlying net sales were up year-on-year for the first time in 6 quarters. This compares to what we qualified as the trough of our businesses in the second half of last year. Net sales were up 4% versus Q3 2023 despite the negative pricing impact from soda ash. This was compensated by higher volumes. Moving to EBITDA on Slide 9. It amounted to EUR 259 million in the third quarter. This is stable compared to Q3 last year after 4 quarters of negative year-on-year comparison. Volumes had a slightly positive impact on our EBITDA evolution, highlighting a moderate increase year-on-year in the majority of Solvay end market compared to a quite low Q3 2023. As expected, net pricing year-on-year was negative, minus 7%, mainly as a result of the lower prices in soda ash, while remaining very resilient in our other businesses. Cost-saving initiatives continue to support EBITDA with EUR 31 million of additional savings accumulated in Q3 2024. Consistent with previous quarters, approximately half of the cost savings were driven by variable costs and half by fixed costs. Looking at the fixed cost, you will note that they were slightly negative at minus EUR 8 million, but this is mostly linked to the difference in variable remuneration accruals between this year and last year. In Q3, the savings initiatives have compensated inflation. And on a year-to-date basis, fixed costs have reduced by EUR 46 million. Overall, the EBITDA margin in Q3 was 22.4%, which is 3.2 percentage points lower compared to last year, but consistent with what we've delivered in the first half of 2024. Looking into the segment now and starting with Basic Chemicals on Slide 10. Sales were slightly up in Q3 with higher volumes of 9% being mostly offset by the negative price impact of minus 7%. In soda ash and derivative GBU, sales were slightly lower by 2% in the quarter due to lower prices in soda ash. This was almost offset by higher volume in both soda ash and bicarbonate. Demand for soda ash continued to be supported in the seaborne market, but this was partly offset by the softer demand in container glass in Europe. Bicarbonate volumes continue to increase, especially thanks to demand in feed and flue gas treatment. Peroxide sales increased by 9% organically. Volumes were up year-on-year in merchant market, especially in bulk mining and chemical applications and also grew in HPPO and in electronics for our high-purity grades, notably in Asia. The EBITDA for the segment amounted to EUR 181 million, down minus 22% compared to Q3 2023. This decrease is partly linked to the fact that Q3 last year included licensing revenue for peroxide. And I'm happy to confirm that we will have the same type of deal in Q4 this year, which will make it neutral in terms of EBITDA on the full year basis. Philippe will come back to that when speaking about the guidance. The EBITDA margin was 26% in the quarter for the whole segment, down from the record level we saw in the corresponding quarter last year. Moving to Performance Chemicals on Slide 11. Segment sales in the quarter were up plus 9% compared to Q3 2023, thanks to higher volumes. Prices were stable year-on-year. Silica sales declined 4%, driven by lower prices due to formula indexation, while volumes were slightly higher but lower sequentially on tire market. Coatis sales were up plus 29%, driven by higher volume and prices in both solvent and polyamide chain product line. Special Chem sales were up 2% year-on-year with positive development in Electronics while being lower in the automotive end market. The EBITDA of Performance Chemicals for the quarter was up 26%, thanks to higher volume year-on-year in most product lines, although lower sequentially on the automotive application. The EBITDA margin increased year-on-year by 0.3 percentage points to 17.6%. Moving to corporate now on Slide 12. As you have read in our press release, corporate EBITDA was only minus EUR 2 million in the third quarter as the segment continued to benefit from structural cost savings linked to Solvay new leaner organization, but also continued to see the positive impact of lower spend on our discretionary expenses as well as phasing effects. Generally speaking, the corporate costs have been very low since the demerger. And I would like to pause here and review more in detail what you can expect for the EBITDA of that segment. As you can see on the slide, we have separated the normalized EBITDA in blue from the one-off items in purple. The normalized part consists of the share of corporate costs and function costs that are not reallocated to the segment and the one-off includes costs and savings that are exceptional by nature. In 2024, the normalized part benefited from the first wave of SG&A savings made possible by the separation. The exceptional element includes the lower discretionary spend, which combined with our minor market margin on TSA with Syensqo will offset the negative impact of our Dombasle energy transition project accrual that we booked in H1. To summarize, we expect both the reported and normalized EBITDA for 2024 to be approximately minus EUR 50 million to minus EUR 60 million. And looking ahead, while the normalized EBITDA is expected to remain stable, the total corporate costs should temporarily increase in 2025 and 2026 as Solvay faces the stranded costs remaining from the exit of the TSA with Syensqo. In 2026, Solvay also expects some higher costs linked to its new ERP rollout. For 2027 and 2028, [ stranded ] costs will be fully offset and the ERP implementation and the simplification of our IT landscape and functions will generate a second wave of savings. So you might expect to see the normalized EBITDA of the Corporate segment gradually improving. Moving to the free cash flow on Slide 13. We generated EUR 74 million EBITDA of free cash flow in the third quarter, bringing the total of the first 9 months to EUR 320 million. This was supported by the EBITDA performance, while we accelerated as planned our investment during the quarter. The cash out for restructuring provision was again rather high in the quarter as we continue to see the consequences of some of the plans that were launched prior to the demerger. Finally, the net debt on Slide 14. At the end of September, net debt is stable compared to the end of June and only slightly higher than what it was at the end of December 2023. Our leverage ratio remains stable, well below 2x. So if you consider the financial and other long-term liabilities, this is well in line with what we committed to during our Capital Market Day in November last year. Philippe, back to you for the outlook and concluding remarks.

Thank you, Alex. So we delivered another solid quarter. We are proving that as an essential chemicals company, we can deliver a resilient performance quarter after quarter even in a more challenging economic environment. Now looking ahead into Q4, we expect the trends we've seen so far to continue with some potential seasonal effects expected towards the end of the year. As we anticipated from the beginning of 2024, our markets are not experiencing any structural recovery. In that context, we confirm today our guidance of an organic growth of the EBITDA between minus 10% and minus 15%. We expect to be at the high end of that range, meaning minus 10%, thanks to our performance in the first 9 months with an EBITDA close to EUR 800 million. And also thanks to the accelerated delivery of our cost-saving initiatives and on top of that, thanks to the new license just mentioned by Alex for our peroxides business. This license has been signed in October -- last month, in October '24 with Huajin in China for 300,000 tonnes per year propylene oxide facility and the initial revenue will be booked in the fourth quarter. We will continue to deliver on our cost savings. While we still expect to reach EUR 150 million savings by the end of 2025, we have anticipated the launch of some initiatives, and we will end up '24 above our EUR 80 million objectives that we announced last quarter. We also confirm our guidance of free cash flow to Solvay shareholders from continuing operations of more than EUR 300 million and our CapEx expectations of EUR 300 million to EUR 350 million. The acceleration of the CapEx in the second half relates to the ongoing transformation of our company and to our willingness to strengthen our position in specific growth areas so that we are prepared to seize new growth opportunities when they arise. Now looking forward to 2025, we are approaching it with caution, at least at the beginning of the year. Although everyone expects a recovery to take place at some point, no one today can clearly predict when this will happen and at which pace. That is why we are focused on what we can control, our transformation, and our cost savings program. We are positioning ourselves to navigate with resilience and with confidence whatever happens. Now more specifically regarding soda ash, we are entering into the negotiations for our 2025 annual contracts just now. So this is too early to give you any indication. There's some uncertainty in the short term, but the fundamentals are there. We know things will recover, and we know that capacity will be needed. We are in essential chemistry, not in commodities. Whenever growth is back and in particular, in construction, the market could become tight again very quickly. And the price levels of today are not enough to trigger new capacity projects. To conclude, let me repeat these 2 words, essential and resilient. Solvay is a much simpler company today, delivering essential chemical products that are absolutely necessary. We are leaders both in size and in technology. This is what explains our resilience, why Solvay is able to deliver continued solid performance in such an environment. Thank you for listening. And now we are happy to take your questions.

Thank you, Philippe and Alexandre. [Operator Instructions] So [ Laura, ] now you may open the line for questions. Thank you.

[Operator Instructions] We will now take our first question from Thomas Wrigglesworth of Morgan Stanley.

Philippe, Alexandre, my question is around the new guidance. So it sounds -- just to clarify, it sounds like the peroxide is new, and that wasn't in the guidance given at 2Q. But in terms of the corporate costs, is that new? I didn't quite catch that on your comments? Or is that something that was already baked in, in the 2Q guidance because clearly that's a surprise versus consensus today?

Thank you, Tom, for the question. On the peroxide license, this was expected. It was not secured, but it was rather expected. We didn't know when the negotiation would be finalized, but this was likely to happen. So this is new to the market, but we could integrate it in our range. On the corporate cost, let's say that, okay, we took also the feedback from various questions we received in Q2, and we realized it was a little bit difficult for you guys to isolate what was exceptional in nature from what should be the run rate. So I would say, for the moment, we continue to be very careful on our discretionary spend. As I mentioned, I mean, when we did the spin-off, we have simplified a lot of the organization. In a different market context, we could have restarted a little bit. But okay, considering the market concept, we have kept a very, very, very lean organization. So we've maximized some savings. So we thought it was the right time to give you after 9 months, a new base, a new guidance for this year and for the coming year. So I would say this one is not new. Again, this is why we say we reconfirm our guidance, but the fact that these savings, whether they are structural or a little bit more nonstructural in nature are being delivered quarter after quarter that makes us confident to get towards the high end of the guidance.

Okay. So sorry, just to clarify. You're saying that you don't yet know whether the savings are structural or temporary, but you've been working hard to drive cost savings. So...

Both of them, I mean, we count on them, okay? After you have to deliver them, I mean, it takes -- you measure them every month and you see the impact of flowing to the P&L. So it was part of the range that we communicated at the end of Q2. So to have the savings coming through, as Philippe said, the market environment is not improving, but is not deteriorating. And we've communicated from Q2 that we were not especially optimistic on the positive improvement in H2. So that's confirming. So this is why progressively, we are trending towards the high end of our guidance. So all of that was more or less foreseen, but it's going in the right direction on all factors.

We'll now move on to our next question from Martin Roediger of Kepler Cheuvreux.

Yes. I'll also limit my question to one. Can you talk about your CO2 allowances in Europe? How many did you get for free for the next couple of years? And how many do you have to buy in the next couple of years, say, until 2030?

I can take this one. Martin, I mean, we cannot answer specifically on that. What I can say, okay, we are receiving free allowances for the majority of our emissions until 2030. And the way we address the gap into -- which is not covered by the free allowances is first to do the energy transition. I mean this is why we are quite diligent to do the energy transition when it makes sense and when it allows to have competitive production cost. And then for the remaining gap, we will use financial hedges. And what I can say is that between the energy transition projects, which are coming through, and the financial hedges, which are already in place, we are well covered for the -- until 2030.

And the financial hedges have been started quite some time ago. So they are not at the current CO2 market price. Does that make sense?

And we will now move on to our next question from Alex Stewart of Barclays.

I wanted to focus on soda ash. And I know it's much more than soda ash, but it is an important product. If I look at what your competitors are saying, if I look at what your customers are saying, if I look at what the industry press is saying, they are all talking about a fundamental shift in the last few months in the soda ash market, whereby China has swung from importer to exporter affecting seaborne volumes a big U.S. competitor of yours, I think, presented that argument in much more vociferous language. Could you please tell us what you expect from the soda ash market over, let's say, the next 6 months? Do you see an impact from changing buying patterns in China? And if not, why are you the only big soda ash company in the world that isn't seeing the effect of these shifts?

Thank you for the question. What we see clearly over the next 6 months is a demand that will stay relatively stable. We don't see any recovery when we look at our order book and keep in mind that on soda ash, the order book gives you visibility over 2, 3 months maximum. So it's relatively short term. We don't see any -- as Alex said, for all our markets, any recovery, but we don't see any deterioration neither, which is really something that is unusual for soda ash because soda ash has always been growing steadily by, let's say, 2%, 2.5%. So this is something new that we have to cope with. And that was already very much reflected in our 2024 results because this shift, as you say, happened between '23 and '24. And what we see today for the beginning of '25 is no change. In terms of capacity, there is not a lot of change neither. I mean the only new capacity that will come on stream next year is our capacity expansion in Green River of 600,000 tonnes. And this capacity will be super competitive. So we are very comfortable, first, I mean, to be able to use it to improve our results whatever happens. And second, to have this capacity available whenever the market will recover. And again, I mean, we really think that the long-term fundamentals have not changed. The markets that soda ash is serving are essential markets. We're talking about glass. We're talking about bicarbonate. By the way, bicarbonate is growing quite significantly, much more than 2% even today, and that has been the case for the past 7 quarters at least. So -- and bicarbonate it's driven by all the special applications, but mainly by the industrial applications, flue gas treatment. We're talking about growth that are very significant, close to double digit. So the market will need capacity. At current margins, those capacities will not take place. That's the only thing we're saying. I mean, if demand is not increasing, we will continue like we are today, and we will have to manage the situation as we are doing today. Today, China is not exporting more than they had in the past. If you look at the past 10, 15 years, China has always been exporting between 1 million and 2 million tonnes per year. So this is not a big surprise, and this is something that we are very well used to cope with, right? The only thing we're seeing is that if at some point, construction recovers, and we know this will happen at some point. And we will see the interest rates going down. Let's see what will happen with the Chinese plan to stimulate the economy. But all this at some point, maybe not in the next 6 months to answer your question, I don't expect this to happen in the next 6 months. But after that, at some point, we will have a recovery. And then the market could become tight again very quickly if there is no capacity, and there is no capacity today coming online.

Okay. So to be clear, you don't expect any change in demand on the seaborne market over the next couple of months relative to, let's say, the first half of this year?

No, no, no. We expect the seaborne market is always volatile. So we expect this volatility to materialize as it has in the past. So you see import export out in China moving from one quarter to another. We will manage this. This will have short-term impacts that we will manage. It does not change the fundamental balance of the global market. That's our vision. Of course, we will check that in the coming quarters.

And we will now take our next question from Chetan Udeshi of JPMorgan.

Maybe let me start with the first question. And maybe this is for Alex. I'm just looking at your volume leverage that you show in your EBITDA bridge. It's been all over the place through this year. It's 17% in Q3, it was 57% in Q2 and it's 25% in Q1. And when I say volume leverage, I'm just calculating the incremental EBITDA from incremental volume growth in revenue. And I'm just curious what's going on by quarters? And why is it so low in Q3? And why was it so high in Q2? The other question, again, just going back to the quality of your reporting here. I'm just curious, why do we have EUR 45 million one-off EBITDA cost incurred in Q2 associated with separation project? Because I thought this was already done and dusted last year. So what additional cost do you have? And last question, just on your license on HPPO. Can you remind us what end product is this license related to? Because I think there is -- you have a strategy to not cannibalize your own hydrogen peroxide business in China. So I'm assuming this is a project related to some other chemical product? And can you also maybe give us some sort of insight into how you see this licensing strategy in terms of contribution per year or every 2 years, every 3 years? How do you see that play out?

Okay. So we'll go quick because 3 questions. And if it's not clear, we'll go in the second round. So the conversion of EBITDA between sales to EBITDA. So this was expected. And again, this -- you could say with the volume we are seeing in Q3, we could be a little bit more upbeat, but we know the recovery that we are seeing towards in H2 is in the more lower margin products. Again, we've mentioned it, Coatis is recovering, but this Coatis is the more cyclical almost kind of commodity businesses where you have lower margin than the rest of the business. While -- on the other side, the opportunities we were able to capture, especially in H2 were in the really high-end type of products. We've mentioned at the time, things like auto catalysis where there were some opportunities to capture some sales as probably inventory were a little bit low, and that's typically very high margin products. So it's really a question of mix. And again, we expect towards the end of the year to that trend to continue. Talking about the EUR 45 million. So that's mostly linked to the restructuring we have announced in -- I think it was a month ago about our [ salon side ] in Fluorine business. This is what is making the bulk of that EUR 45 million.

Maybe I take the last question on the licensing and HPPO. So indeed, you're right, Chetan. I mean we have really 3 different businesses in this business unit, peroxide. The first one is indeed what we call HPPO, so hydrogen peroxide for propylene oxide. And in that segment, we are either investing. This is what we've done in 3 projects in Belgium, in Thailand and in Saudi Arabia or we are licensing. This is what we recently did in China, and this is the scheme that we have implemented for the last license that we've sold and for which we will have the first revenue in Q4 this year. This is hydrogen peroxide that is delivered by pipe on big platforms. So it's sold to -- mainly to one customer. And it's used by a petrochemical company normally that will produce propylene oxide and then polyurethane and all this petrochemical chain. The 2 different segments are distinct. It's the merchant segment. That's the historical business of pulp and paper, where you use H2O2 as a bleaching agent. You also have applications such as where you use hydrogen peroxide as a disinfectant. This is a different market, and it's not supplied by this type of plants. And then you have a third segment, which is developing quite fast and where we invest as well. It's the electronic grade H2O2. And here, we purify to super high levels the H2O2 and we sell it to microchip manufacturers. Here as well, it's another -- it's supplied from other types of assets. So you're right, this is a specific asset. The licensing model is also a different model than we used to have in the past where we have a licensing fee. And we are also generating recurring revenues because we're selling the solution and the catalysts that are required to produce in those, what we call mega plant. And this is one of the technological advantages that we have. Yes, Alex.

And just to answer specifically, here, they were not using hydrogen peroxide before. So it's not removing some capacity from the market, so no cannibalization.

Yes. Absolutely.

And what are they using? What is this customer using that hydrogen peroxide for? What is their end product?

Polyurethane. Let us check, I don't know if it's public or not but...

Okay. Let us check.

[Operator Instructions] We will now take our next question from Wim Hoste of KBC Securities.

I just wanted to check up on the cost savings program. You said that you are reaching out for more than EUR 80 million this year, which was the original target. Can you maybe update us on the targets for the coming years? And also, yes, the kind of -- remind us the kind of initiatives you will undertake to reach those targets, a couple of examples of what's on the agenda for '25 and '26 would be interesting to you.

Yes, absolutely. So in fact, we are confirming our target. In terms of savings, the commitment is EUR 300 million by 2028. We already announced that we should deliver EUR 150 million by the end of next year, so end of 2025. And indeed, we will deliver more than EUR 80 million already this year. So it means we are accelerating a little bit the delivery this year. This comes mainly from the modernization and the digitalization of our plants, which deliver the bulk of those savings both on variable cost and fixed costs. So variable cost, typically, it's about making -- putting IoT sensors using machine learning in order to optimize the consumption of raw material of energy and so on. On fixed cost, it's mainly about predictive maintenance. So putting sensors on critical equipment and in particular, on rotating machines and so on and save on maintenance costs by saving costs on curative and preventive maintenance, which was widely used in the past. Beyond this modernization plan in our plants, we are also generating savings from our simplified organization, right? But here, the bulk of the savings we will do on the organization and the new operating model will be done after 2025 when we will have exited the temporary service agreements that we still have with our access to company Syensqo. I don't know, Alex, if I covered mostly...

I think we were also asking for example, I think yes, we can mention -- I think we mentioned it in the past, but this is a big part and we start to see it [indiscernible] typically in Green River when we were there a few months ago, predictive maintenance, I mean, by -- we signed agreement to purchase a large number of IoT captures that we could install along, which helps people to -- and we could see, I mean, detecting potential massive breakdown and repairing before you have the breakdown. So that's an example. Another one is advanced process control, which is also starting to deliver quite a lot of savings. So yes, it's a lot in the plans, and this is why we can implement it quite quickly.

And we will now move on to our next question from Geoffrey Haire of UBS.

I just wonder if I could ask a question about free cash flow. You're obviously guiding to higher than EUR 300 million, but you've already hit that in the first 9 months. Is there anything we need to be aware of about peculiarities of cash flow in the fourth quarter that would mean that you effectively are either negative free cash flow or neutral?

Yes. I mean in terms of performance, you can expect something that is relatively similar compared to the past quarters. The only difference is that we will spend more on CapEx. And that's the main explanation. We plan to spend between EUR 300 million and EUR 350 million of CapEx over the year. So indeed, what we wanted to do is to secure, I would say, the cash generation during the first quarter to be able to spend what we have to spend and still meet all our commitments. I don't know if you want to complement, Alex?

But I think we can mention also there are a few other elements that will generate some cash out in Q4. We have interest expenses. We have -- as you may remember, we've refinanced the company earlier this year, we had bridge to bridge to bond loan when we started -- when we did the separation and then we refinanced and we will have -- the first bond we pay in Q4, we didn't have any -- almost any interest in Q3 because we ended the bridge to bond and coupons are paid every 6 months. So we have the first one in Q4. And typically, taxes are always a little bit higher in Q4 because you tend to pay in Q2 and Q4. So there are a few elements like that, which are nothing to be worried about. That's just the usual seasonality. But CapEx acceleration or let's say catch-up is really the main factor.

And we will now take our next question from Jaideep Pandya of On Field Research.

I'll stick to one as well. I just want to understand coming back to Alex's question, but a little bit more detail around the contract structure and duration in your soda ash business. Could you tell us how much, especially in Europe of your proportion of your business is on a sort of annual and biannual or multi-annual, sorry, contract? And how much of this is like railcar customers, which I guess we as a market are underappreciating? And secondly, with regards to seaborne, could you tell us like which are your main seaborne markets? So in your seaborne exposure, are you getting a lot of the Chinese competition or actually the seaborne markets that you service are a little bit far away from the Chinese exports? And therefore, actually, your pricing is not getting impacted as much as, again, we think -- and last sort of linked to this three-part question really is what is driving this whole year seaborne market to be better than the traditional markets, which sort of end markets do you think in seaborne are actually doing better than the traditional market, especially in Europe?

Thank you. So in terms of contracts, we have more or less, I would say, 20%, 30% of our contracts that are multiyear. So let's say, yes, 30% of our contracts are long term. 50% of our contracts are yearly contracts. So it's still the bulk of our contracts, but 50%. And the rest is more short term. And the short-term contracts are more specific to seaborne. And to answer your question on seaborne, I mean, we are delivering everywhere in the world. So we are present in Latin America, in Middle East, Africa, in Southeast Asia. Those are the 3 -- 4 big regions that constitute what we call the seaborne. It's seaborne just because there is not -- almost no production unit in those regions. So all the material consumed in these regions is coming from the U.S. and Europe, mainly. Now your question on China. Because, in fact, the cost -- the transportation cost of soda ash is quite important and the soda ash industry in China is not the most competitive. You don't see Chinese soda ash traveling around the globe. So you see Chinese material mainly close to China. So in the Southeast Asian region, typically not far away from China. So this is where, I would say, we can be in a position to compete with Chinese producers. But keep in mind that they are not exporting big quantities. They export, as I said earlier, let's say, between 1 million and 2 million tonnes per year on a total market outside of China, which is around 34 million, 35 million tonnes. So in this Southeast Asian region, you can indeed find material coming from China, material coming from the U.S. mainly. We could also send from Bulgaria. We are competitive enough to do it. And here, you have probably more volatility than you can see in other markets. So clearly, the dynamic that you can see in Latin America or in Middle East, Africa is different from the one in Southeast Asia. Southeast Asia is the market that is more directly impacted over a short period of time, I would say, by the Chinese soda ash. And here, you have to be able to manage this volatility, and this is what we do. This is what we've always been doing in the past. There is, I would say, today, nothing really new in that perspective. And the end markets on seaborne are mostly the same in Southeast Asia, what you see is a big development of glass producers. You have a lot -- and by the way, also Chinese headquartered -- China headquartered companies building glass capacities in Vietnam, in Malaysia and so on. So you have, I would say, the same range of end usages and a bit more development of glass manufacturing in Southeast Asia.

And just as a follow-up, apologies, Geoff, for this. But we are seeing shutdowns in capacity, obviously, in Europe, in some industries. Again, just curious what is your utilization in Europe? And if there are shutdowns of glass manufacturers in Europe because of capacity readjustments or CO2 headaches or whatever? How would you deal with that? Or is that in your long-term plan basically?

Yes. It's clear that we are not investing in new capacities in Europe. We are, on the contrary, I think, readjusting a little bit our capacities. Last year, we've downsized our facility in Spain because we've decided to focus more on higher value-added products like Bicar and so on. So what we see in Europe is competitive capacities that will continue to deliver the European market. Obviously, we need to support our customers and make sure that we continue to produce an essential product such as glass in Europe. We are also working a lot on the energy transition to guarantee this competitiveness in the long run and to supply low-carbon products that is requested by European customers. And we are focusing more and more on bicarb. Today, we are producing the higher grades of bicarbonate for -- in particular, for food and for pharmaceutical applications, mostly in Europe.

And we will now take our next question from Peter Clark of Bernstein.

Back to 1 question, but 2 bits, if I can put it that way. On the Green River expansion, you were quite confident back in September that with the others delaying their capacity, you're going to have a more favorable environment than it could have been as you ramp up. So I just want to check on your very confidence still on that ramp-up? And then secondly, related to that, obviously, it's a relatively clean product. And do you get a premium for some of the American customers for this? Or do you see it easier to sell? I mean, obviously, in Europe, you have mentioned that you are getting some customers who demand on wanting these sorts of products. So I'm just wondering about the Americas.

I'm not sure I catched the...

How confident we are in the ramp-up.

In the ramp-up. I think -- so this new capacity should be available over the first semester, I would say, of next year. This capacity will be the most competitive in our asset portfolio. So I can guarantee that we will use it. We will ramp it up as soon -- as fast as we can. And even if there is no additional demand at that time, we will use it and make money. It will be favorable, and we will have a return on the investment. And when the demand recovers, and that can happen second part of next year, but of course, no one knows, we have this capacity available, I mean that's a question, I think, that was asked earlier on, but -- we have -- it's -- again, we're not in a commodity business. So we are in an essential chemical business and our assets are running at 75%, 80%. So we don't have a lot of available capacity today. It's indeed, as you say, a clean product. We are moving gradually into low-carbon production. I think -- well, customers need to support us. That's very important. They need to pay a premium. If you ask me, is it enough today, I would answer no. They need to pay probably a bit more, but they are supporting us. Everyone understands that you cannot do this energy transition for free and that everyone has to take its fair share of this effort. Now that being said, and so you've seen that we have started up a brand-new investment in order to abate the greenhouse gas emitted by the mine in Green River. We are able, despite the fact that this is voluntary, there is no carbon cost in the U.S. as opposed to Europe, for example, but we were able to valorize those emission reductions in the Californian market in order to support our investment. So we find ways to make those investments profitable and to secure our competitiveness in the long run.

Can you allow me to clarify because -- I mean, the capacity will be ready around the end of H1. I mean we -- the sales will not immediately ramp up. Let's be clear. We will not push immediately the sales. And this is a project actually we have already delayed. You may remember, even before the COVID and when COVID came, we decided to slow down. So -- but we want to make sure it's available towards the mid of next year.

And next, we'll go to Tristan Lamotte of Deutsche Bank.

Good to see soda ash and derivatives sales up sequentially in Q3 versus Q2, implying maybe in your view that soda ash has reached its quarterly trough, but the sequential increase wasn't matched in Basic Chemicals at an EBITDA level. So I was wondering if you can maybe explain why Basic Chemicals EBITDA was down sequentially, EUR 30 million in the quarter when on top line soda ash was up.

Sure. I mean, and again, we are looking at the business on a quarterly basis. So you always have some moving pieces. I would say between Q3 and Q2, fundamentally, the business, the volume, the mix; however, you look at soda ash -- there is no major change. I mean you can have a few things shifting here and there. The main changes in EBITDA, and I don't remember if we said it clearly, but it's more the fixed cost part. We had some maintenance, some turnaround to perform in our site or in certain logistic facilities in Q3. So that explains the slightly different margin between Q2 and Q3, but it's more internal events than business or business trends. Is that clear?

Yes, it's clear.

And we'll now take our last question from Sebastian Bray of Berenberg.

The question is on energy cost relief. From memory, it was mentioned a few quarters back that this is no longer an issue for Solvay. And effectively, this has been hedged out. But if we do get a big decline in 2024 and '25 versus '24, is this helpful? Or it's something that doesn't make a difference anymore? And if I could squeeze another one in, the company has previously indicated '24 is the trough year for soda ash pricing. What is your degree of confidence around that continuing to be the case as we move into '25?

So in terms of energy, I think this is indeed mainly a question, I think, for soda ash, where energy is really very -- a big part of the production cost. And indeed, we plan to continue to have this energy adjustment mechanisms so that we can have a sort of natural hedge, a pass-through of our energy costs in our different contracts. So the plan is to continue. We still see 2024 as the trough for soda ash. There is not a lot of room, I would say, for prices to -- for margins to continue to deteriorate. And I would even say that if -- again, we want to have some investments at some point. The current level of margins are not enough to support those investments. So we know that at some point, we need additional capacities. Again, today, only our capacity expansion in the U.S. is in the pipe outside of China. And we will need capacity. And today, if you take the investment decision, it takes 4 to 5 years to build a solution mining in the U.S. So I see -- continue to see it as a low point.

Obviously, you have a little bit of volatility.

We talked about Southeast Asia, for example, Southeast Asia can...

Yes, can go one side or the other. I think here, I mean on this type of business, again, essentially you need to go beyond the quarter. You can capture an opportunity one quarter, you can have the spot prices going up or down, sometimes [indiscernible] structurally in U.S. and Europe, the prices are below what is required to generate investment. After you have some [indiscernible] is our ability to adapt.

That's all the time we have for Q&A. I will now hand it back to Geoffroy for closing remarks.

Thank you very much all for your participation today and your discipline in the Q&A session. If you have any questions, please feel free to reach out to the Investor Relations team. And we will issue our Q4 earnings on the 6th of March 2025. Thank you very much.

Thank you.

Thank you. Bye-bye.

Thank you. This concludes today's call. Thank you for your participation. You may now disconnect.